ZEE shares in news as SAT to hear Punit Goenka's appeal against Sebi order today

Shares of Zee Entertainment Enterprises India (ZEEL) will in focus on Wednesday as Securities Appellate Tribunal (SAT) would hear Punit Goenka's appeal seeking a stay on Sebi order that barred him from holding key positions in the group companies and in the merged ZEE-Sony entity.

Sebi had barred Goenka and Subhash Chandra from being directors or key management personnel in any listed firm as they allegedly abused their positions in the company and siphoning off funds for their own benefit. To recall, two independent directors of ZEE resigned in November 2019 after raising concerns over several issues, including appropriation of certain fixed deposit of ZEEL by YES Bank for squaring off loans of related entities of Essel group. The Sebi order by the capital markets regulator came in the light of an investigation into such allegations.

Meanwhile, Motilal Oswal Securities in a latest note said the merger between ZEE and Sony Pictures Networks India is expected to create a dominant player in the media industry. A war chest of $1.6 billion (capital infusion) and steady annual Ebitda generation capability of Rs 4,000-5,000 crore from the linear business should enable the company to compete within the high-growth digital segment and to fund its recent foray into the sports segment, the domestic brokerage said.

"Further, the company’s deep understanding of the Indian entertainment market, better bargaining power, and ability to produce a strong line-up of content should allow it to have a strong play within the OTT space. We believe the current valuations do not fully capture the combined entity’s potential growth catalysts. While there has been some stability in subscription revenue with the implementation of NTO 3.0, the persistent softness in the ad market and the company’s decisions on content investment would be the key factors to watch out for," Motilal Oswal Securities said.

The brokerage has retained its 'BUY' on the stock with a target of Rs 320, valuing the company at 7 times EV/Ebitda for the linear business and 1 time EV/sales for the OTT segment on FY25 estimates. "It implies a 30 times P/E multiple on FY25E for the standalone entity," the brokerage said.

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